Archive for May, 2020

The Rules Around Long Term Care Planning

Posted by Sam Binstead

No one likes to think of a time when they lose their independence. But it could happen to all of us at some point, some sooner than others. The problem with not thinking about it is that you could end up facing the bill for your care costs later in life, with no real idea of how you are going to pay for it. After all, long-term care is a major expense, and it can decimate your savings account faster than you realise. But with a little forward planning you can prevent this, and make sure both you and your wider family are well cared for.

The Basic Rules

First off you have the basic rules. In essence, the government states that most people with more than £23,250 in capital will be responsible for paying their own care costs. People who have less than this amount in capital can seek financial support from the local authority, and the help offered varies from council to council. However, if it’s nursing and health care that’s needed, rather than residential, then the NHS may contribute towards the costs of care, or in some cases even cover them completely. The level of help you receive does somewhat depend on the schemes your local authority has on offer, but if you fall below that capital threshold, there will be something available for you.

The Outliers

Of course, the term ‘capital’ is quite broad, and for the purposes of care costs there are a few things it doesn’t cover. These things fall outside of the means test for home-based care entirely, and for the first 12 weeks of residential care. The main thing to note is the value of your home. If you need residential care, then this value is excluded for the first 12 weeks only. After that it’s likely that the value of your home will be taken into account, unless your spouse is still living there. Since in many cases the home may need to be sold to cover the costs of care, local authorities have a provision of short term support, which can cover care costs in the immediate future so that you can properly market and sell your house, rather than rushing the purchase and potentially losing a chunk of value because of it.

There are some other assets that fall outside of the means test, but these tend to be more specific, so this is something you should seek individual guidance on from a financial planner. Taking the advice of a professional means you can ensure no assets are being deliberately moved to avoid the means test, since local authorities have the power to recover and claim them if they are. Similarly if any assets are gifted away before the care being needed, the council will try to include any unjustified gifts, and they will attempt to demonstrate why the gift was made to avoid care costs. So it’s important you take care when planning how to fund your care and avoid getting into trouble.

Why Plan To Pay?

On average, residential care can cost around £1,000 per week, sometimes more depending on the type of home you choose. When faced with this figure, it’s no surprise that so many people look to avoid paying for care themselves. Not all care homes charge at this level, and by doing a little research you should be able to find one that fits your budget. However, this kind of charge can wipe out your savings pretty fast, and many worry about being able to afford the length of care they may need.

But when we’re asked what the best strategy for avoiding paying for care is, we tend to say there isn’t one. We believe it’s best to be in control of the quality of your own care package, rather than having to rely on the council for support, who can then make decisions as to where they can afford to place you or your loved one. After all, local authorities can trim care to the barest minimum, while families do have the ability to top up council funding to improve the quality of care if they want to. So rather than looking to avoid paying entirely, it’s best to plan your care options in advance, including how you will fund them, and what your options are.

At Chilvester Financial we specialise in helping you plan for the future – and that includes the care of you and your loved ones. In fact, we’ve published a short booklet that gives you more information on long-term care planning, the issues you might run into and the options you have. So if you would like a copy to read through, or you’d like to speak to us directly about planning for you or your loved ones, just contact us today.

How Goal-Setting Helps You Plan Your Finances

Posted by Sam Binstead

If there’s one rule we believe in in life, it’s that it’s always easier to plan your route when you know what the destination is. Otherwise it’s a bit like getting in the car and not knowing where you’re going. You can drive around a lot, but you’ll never end up where you need to be. The same principle applies to financial planning. If you know what your life goals are in the beginning, then you can easily create a separate financial plan to achieve every one of them, and an overall plan to tie it altogether. Individuals with clearly defined goals are also much more likely to achieve them, so it’s a win all round really. But how do you set goals, and what should you be planning for?

How to Set Goals

Good goal setting starts with asking yourself what it is you want from your life, or your business. It’s important to consider both the short and the long term here, as this will impact what kind of planning you need to do. For example, you might want to save for a holiday, or a new sofa set in the next 12 months, which would be a short-term goal. You may also want to buy a home someday, which means you will need to put money away for that over a 3-5 year period, making it a medium-term goal. And for the longer term, you may want to create a savings pot to support your child through higher education, or to fund your own retirement. Whatever your goals are, they need to be well-defined, not woolly or too generalised. This means setting the result, a financial figure to achieve it and a timeframe you want to achieve it in. This will ultimately help you choose the right financial tools to achieve your goals, as well as linking certain financial products together to boost success.

Challenges You May Face

No process happens without challenges, including trying to set your own goals. The biggest one you’re likely to come across is procrastination. With changes in circumstances and the day to day uncertainty of life, you may end up putting off your goal setting, which only delays your progress. It also means you would lose out on certain benefits like compounding, you could end up under or over saving, or your resources could be used efficiently, all of which would set you back when you do eventually set your goals and financial plan.

The other main challenge is the common practice of ‘sacrificing today for a better tomorrow’. For example, starting with a small amount of savings can create a sizeable amount of wealth over time. But unless your goals are well-defined, strategies like investing might not be much help. You could also find yourself setting unrealistic goals, expecting unrealistic returns on investments, or looking for quick-fix financial solutions instead of creating a long-term strategy. Luckily, all of these pitfalls can be easily avoided by working with a financial planner at every step.

Life Insurance

Once you have established what your goals are, you will need a roadmap to get there. One of the most prominent things to feature in most plans is life insurance. This is a key risk management tool that provides for more long-term financial goals. Life insurance helps to mitigate the risk of not meeting your long-term goals, like the needs of children and grandchildren. For example, if your goal is to provide for your children, then you would direct at least some part of your savings into life insurance to provide for them. You may have a specific amount you want to save ready for when your child is a certain age, such as a house deposit or university fund. If you were to pass away before you reached that goal with your other savings efforts, then your life insurance plays its part in securing the financial future of the child by contributing up to, including or over that amount. By setting goals for both life and finances, you can help safeguard your family against any financial crisis, including death and disability, ensuring you can still support your financial dependants in the way you want.

At Chilvester Financial, we work closely with individuals and business owners to help them take control of their lives through effective financial planning. A big part of our planning process is to understand your goals, and to help you define them clearly. Once we have done this, we can evaluate your unique circumstances and create a tailored financial roadmap to get you there. If you would like to know more, just get in touch with the team today to book your free, no obligation consultation.

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